Ask Question
6 July, 19:19

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below: Machine-hours Labor Costs Highest observation of cost driver 1,000 $32,000 Lowest observation of cost driver 200 $16,000 What is the constant for the estimated cost equation

+3
Answers (1)
  1. 6 July, 22:35
    0
    Fixed costs = $12,000

    Variable cost per unit = $20

    Explanation:

    Giving the following information:

    Machine-hours Labor Costs:

    Highest observation of cost driver 1,000 $32,000

    Lowest observation of cost driver 200 $16,000

    To calculate the fixed costs under the high-low method, we need to use the following formulas:

    Variable cost per unit = (Highest activity cost - Lowest activity cost) / (Highest activity units - Lowest activity units)

    Variable cost per unit = (32,000 - 16,000) / (1,000 - 200)

    Variable cost per unit = $20

    Fixed costs = Highest activity cost - (Variable cost per unit * HAU)

    Fixed costs = 32,000 - (20*1,000)

    Fixed costs = $12,000

    Fixed costs = LAC - (Variable cost per unit * LAU)

    Fixed costs = 16,000 - (20*200)

    Fixed costs = $12,000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below: Machine-hours Labor ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers